Britain's businesses are calling for the Bank of England to ramp up its programme of quantitative easing, after official figures showed that manufacturers cut back production sharply in October.

With the eurozone crisis depressing confidence, output from the manufacturing sector declined by 0.7% last month, according to the Office for National Statistics (ONS), underlining fears that the economy is grinding to a halt.

As the Bank of England's monetary policy committee holds its monthly meeting, the British Chambers of Commerce called for it to announce an extra £50bn of quantitative easing, the emergency policy by which the Bank uses electronically created money to buy government bonds.

"Given the current economic challenges, we believe that the MPC should announce a further £50bn increase in the QE programme on Thursday, to £325bn," said David Kern, the BCC's chief economist.

Output from industry in October was just 0.3% higher than a year ago, and remains almost 5% below its pre-credit crunch peak.

A "march of the makers" was at the heart of George Osborne's plan for growth but the chancellor warned MPs on Wednesday that there was a "big downside risk" to the UK economy from events in the eurozone, which many analysts believe is sliding into recession. He told the cross-party Treasury select committee he would deliver his spring budget on 21 March next year.

Analysts said that manufacturers had been hit by a double shock: a downturn in orders from across Europe – as the sovereign debt crisis and the shortage of bank lending undermine confidence and depress spending – coming on top of weak demand at home, as households struggle to adjust to rising prices.

"Domestic demand for manufactured goods is being held back by the major squeeze on consumers' purchasing power," said Howard Archer of IHS Global Insight. "Meanwhile, a marked slowdown in global economic activity – particularly in the Eurozone – is clearly hitting manufacturers' export orders hard while the eurozone crisis is additionally causing major uncertainty for manufacturers and weighing down on confidence."

On the wider measure of industrial production, which includes energy production and mining, output was also down by 0.7% in October, the ONS said.

Archer warned that the rapid decline in industrial output, which makes up just over 15% of the economy, had increased the likelihood that the economy as a whole would contract in the current quarter.

Alan Clarke, UK economist at Scotia Capital, said: "Whether the economy has already entered recession or not is pretty academic. The economy is clearly punching beneath its weight."Mark Lee, head of manufacturing at Barclays' business banking arm, said: "In this climate UK manufacturers are returning to a business strategy that has become very familiar over the past three years – keeping an incredibly tight rein on cost and working capital and only investing where essential. It is not a recipe for growth, but certainly a recipe for staying the course through a difficult period."

The National Institute for Economic and Social Research, which uses the ONS manufacturing figures to forecast the growth rate of the economy as a whole, said GDP was likely to have expanded by 0.3% in the three months to November, and echoed the BCC's call for action from the MPC. "Economic growth in the UK remains subdued. These data lend support to the further loosening of UK monetary policy," it said.